Premature

My friend recently met with a tech startup in the area. During the meeting, he asked the founder how the business was doing. The founder enthusiastically replied by telling my friend how many people he had on staff: 12. Not too long ago they had two. They’ve been busy raising capital over the past few months.

Another business I’ve been watching is renovating an office. A nice office with a bunch of custom stuff. The owner is doing a lot of the work himself. Their social media stream used to be full of interesting updates about their products. Now they incessantly post pictures of the new office. I’m sure it will be a very nice office when it’s finished, complete with a slick automatic espresso machine.

And a young couple we know is building a big fancy house. They want to build big because this is where they will live happily ever after, which of course they know for certain after being married for a whole two years. No kids yet, both working full time, living the D.I.N.K. life (Dual Income No Kids).

Don’t get me wrong, hiring people is exciting, big new offices are often necessary, and buying a home makes you feel warm and fuzzy inside.

But unfortunately, these and other big decisions are often acted on prematurely.

Doing them is fun. Undoing them sucks.

I’ve experienced the not-so-fun flip side of undoing them. I’d like to tell you about it so that hopefully you don’t make the same mistakes.

Early in my career I helped a company raise capital to expand. We had tons of borrowed cash and a big idea. We just needed people. So we started hiring. It was really exciting. Our team nearly doubled in a matter of months. $2 million and a failed business model later, the money ran out and people had to be let go. Guess who got that job?

I’ll never forget looking across our big conference room table at a mother of three, sole income provider, and telling her she no longer had a job or insurance because of the stupid decisions we had made. The pain in her eyes made me physically sick. It was one of the hardest things I have ever done.

One thing that sidetracked the company during this growth phase was the renovation of a bigger office. It was a huge project, and it took the owner’s full attention nearly everyday until it was finished. We really didn’t need a bigger office, but the mindset was that someday we will, and we have the money now, so why not go ahead and build it?

When Mandy and I were looking to buy our first home, we almost bought a modest house in an affordable neighborhood. The deal ending up falling through which gave us the chance to reevaluate and start looking at other houses. We quickly found a nicer house in a more upscale neighborhood. It was nearly finished and we had to act fast if we wanted it (i.e The Scarcity Principle. Makes people do all kinds of crazy things.). I remember vividly one conversation we had in the car, realtor in the back seat, contract in hand, about the monthly mortgage payment. We could just barely swing it, and I remember justifying all kinds of ridiculous things in my head. A year later, we got a nice little letter from the bank stating that our payment was going up $300 per month to cover the taxes on the house (apparently, you only pay taxes on the lot the first year). Gas prices had also spiked, and we were commuting 60 miles everyday. I was so defeated when I had to tell the bank we couldn’t make our payment. The day we sold that house was one of the best days of our lives, despite losing our life’s savings and $30,000 in equity.

For me, these experiences have been painful, disappointing, stressful, and most of all invaluable.

They taught me the importance of waiting until the time is right. It’s so easy to get caught up in the excitement of now. We want things now. But getting ahead of yourself can make you do things that are really hard (or impossible) to undo.

Doing things prematurely taught me some important lessons that, if you’re still reading, I leave with you:

1. Debt is a cruel master. Stay as far away from it as you possibly can. It’s so easy to convince yourself you need it. And people will tell you that you can’t grow a business without it, can’t get a degree without it, can’t buy a car without it, and on and on. Don’t believe them.

2. Create margin in your life. It might be painful getting there, like it was for us to sell the nice big house, but it was worth losing all that money and equity to reset and start living below our means. Having margin insulates you from the unexpected and empowers you to make sound decisions and try new things.

3. Always ask yourself, “Do I really need this right now?” If you’re honest with yourself, the answer is usually no.

4. In business, I’m now fiercely opposed to buying anything that does not directly impact the quality of our work. Only when the time is right (and the cash has been saved) will we have a nice office, hire support staff, or buy a fancy espresso machine.